Median home price in Santa Cruz County $545,000 in August; sales up, too

SANTA CRUZ - Home sales in Santa Cruz County were robust last month, with 209 sold, the most in August since 2005, when the boom was on.

The median price, the midpoint of what sold, was $545,000, thus remaining in the mid-$500s for the second month in a row after being in the $400,000 range for a year.

"Strong sales is now a trend," said Gary Gangnes of Real Options Realty, who tracks the numbers.

Some see a housing recovery, while others say it's only temporary, as long as the Federal Reserve policy is for low interest rates.

Mark J. Perry, professor of economics and finance at the University of Michigan and author of the Carpe Diem blog, contends affordability is supporting the housing recovery nationwide and cites national statistics from Trulia showing buying a home is 45 percent cheaper than renting.

Mark Hanson, an analyst in Menlo Park, called the national home price gain disappointing, given the drop in interest rates and the reduction in foreclosures.

It's hard to say the Trulia comparison applies to Santa Cruz County since there is no database covering rentals countywide.

Gangnes reports 1,069 sales in the county from March to August, more than any other similar period since 2005.

Listings have shrunk, with 822 as of Sept. 1, down 20 percent from a year ago.

Gangnes pointed out 339 listings are under contract, so only 483 homes are available.

Meanwhile, the unsold inventory index, showing how long it would take to deplete the supply of homes at the current sales rate, is 3.9 months, the lowest since 2005.

Homes are selling faster, 67 days on the market in August, compared to 90 days a year ago, according to MLSListings.

Foreclosures are having less of an impact.

Sales of bank-owned homes and "short sales," in which a home is sold for less than what is owed, made up 28 percent of single-family home sales in August compared to 48 percent in April. Distressed sales for condos dropped from 42 percent to 26 percent, and the median price rose to $356,750.

Watsonville has 77 listings, with 12 active - two short sales and one bank-owned - and 65 are pending sales, with 41 short sales and nine bank-owned, according to Century 21 agent Stephen Pearson.

For the past two months, short sales outnumbered bank-owned sales.

"The banks are cooperating more with short sales and they have become a viable alternative," Pearson said, noting some of the "regular" sales have been purchased by "flippers" at the courthouse steps and then resold for a profit.

The Office of Mortgage Settlement Oversight, which monitoring five big lenders that service mortgages, reported nearly 26,000 short sales in California through June 30 with relief averaging $151,000 per borrower.

In some cases the homes where owners are behind on mortgage, payments never reach the foreclosure auction stage because investors are buying pools of distressed properties, said Coldwell Banker agent Mark Vincent said.

A former stockbroker, he noted the stock market is at historic highs, giving investors money to spend, and Coldwell Banker statistics show sales of homes over the hill for more than $1 million are up dramatically.

"We usually trail that market by six months," he said.

He handled two August transactions in Santa Cruz near the median. A three-bedroom house at 1150 Morrissey Blvd. sold for the asking price of $550,000 after two weeks. It had fetched $772,000 in 2007. The sellers, who bought in Aptos, had paid $560,000 in 2009.

In the other, a longtime owner sold a two-bedroom Craftsman house at 421 Cleveland Ave. for $560,000 after getting multiple offers. Vincent's client liked the location and walkability.

A three-bedroom house at 759 Graham Hill Road in Scotts Valley sold for the asking price, $525,000, after five days, according to Faith Sackett, of American Dream Realty, who represented the seller.

The house had "great bones," but needed some upgrading, she said.

She's representing sellers in Aptos with a higher asking price; that home has been on the market a couple weeks and is still available.

Sackett, who used to work in lending, said it would take $90,000 to $95,000 in income to afford a home priced at the median of $545,000.

If prices move up more, will homes still be affordable?

"That's a good question," she said, noting unemployment is still relatively high and the jobs created in the recovery have been lower-paying jobs.

Tai Boutell with Santa Cruz Home Finance said a household income of $71,000 could qualify buyers for a loan to purchase a home for $540,000 with 20 percent down.

With income of $87,000 and minimal credit card or other loan payments, a family could buy a $650,000 home with 20 percent down and a 30-year fixed-rate mortgage, by his calculation. Principal, interest, taxes and insurance would be about $3,160 monthly.

"That same family could buy a home for about $510,000 using the FHA loan program, with 3.5 percent down," he said, calculating the monthly payment at $3,367.